I've been having one hell of a time with these dog pee spots. My entire lawn was tore up at the beginning of the summer because of the spots and the holes the dumb dog dug. To rectify the pee spots I did something like what you suggested.
I took a shovel and dug a little hole to loosen the dirt like six inches. Then I combined fertilizer, dirt, and grass seed in a bucket. I took that stuff and put it on the hole that I had just dug up. Then I stomped it down with my foot and put a light coating of dirt over that to keep the friggen birds from eating the seed (took me two tries to figure out that they were eating the seed). Watered daily and in about a week I had grass growing.
I also heard you can put a tablespoon of ketchup in your dogs chow and it will reduce the stuff in the pee that burns holes in your lawn. I didnt try it because I do not see how that could possibly work.